U S West Ups Spending, Targets DSL

5/28/2000 8:00 PM Eastern

By: MIKE FARRELL

U S West plans to boost its capital spending for the year by $500 million in an effort to revamp its network to handle voice, video and data services.

U S West said in its 10-Q annual report, filed May 15 with the Securities and Exchange Commission, that it spent about $1.3 billion in the first quarter-up from $758 million in the first quarter of 1999-and that it plans to spend $4.2 billion on capital improvements for the year 2000. In 1999, the company had capital expenditures of $4.2 billion for the year.

The telco said in the document that it plans to use the money to expand access-line growth and to modernize its telecommunications network.

Spokesman John Lentz said the company would not break out the specific areas to which it will devote capital. It will spend the money deploying fiber-optic lines for all of its services.

Digital-subscriber-line deployment is likely to be included in that mix. According to the company, U S West increased its data (including DSL, very high-speed DSL and dial-up Internet-access services) and wireless subscribers by 230,000 in the first quarter to 1.2 million customers.

But one area that most likely won't get a big boost is U S West's VDSL network, currently operating in Phoenix. The telco had expressed plans to expand the offering to customers in the Denver suburbs of Boulder and Douglas County, Colo., later this year.

U S West had planned an aggressive rollout of VDSL, but scaled back those plans when it agreed to be acquired by Qwest Communications International Inc. The rollout only got as far as its first market, Phoenix, where the company has about 31,000 voice, video and data subscribers.

The Qwest merger should be completed sometime this summer.

VDSL uses existing copper telephone lines to transmit video, voice and data service. The technology is similar to DSL service, an offering from several telcos that allows the simultaneous transmission of voice and high-speed data.

But VDSL has even more stringent distance limitations than DSL-customers need to be a maximum of 4,500 feet away from the telco's central office to receive VDSL. To receive DSL, customers have to be within 18,000 feet of the central office.

While the $3.4 billion earmarked for the rest of the year will go toward upgrading all of U S West's telecommunications infrastructure, it is likely that VDSL will not see a good chunk of that spending.

Janco Partners analyst Tom Friedberg said that while U S West has been one of the more aggressive regional Bell operating companies in rolling out DSL service, he believes the VDSL rollout is in limbo.

Friedberg added that although former U S West chairman Solomon Trujillo was a big fan of VDSL, Qwest chairman Joseph Nacchio has not embraced the technology.

"There is no question that Solomon Trujillo championed VDSL, and there is no question that Joe Nacchio wants to compete in video," Friedberg said.

"Qwest will continue with VDSL if it makes sense and it is a quality offering," he added. "My sense is that it's going to be DSL and especially IDSL [integrated-services digital network DSL]. VDSL may not have a life after the [merger] closing."